Globalworth Regulatory News (GWI)

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this information is considered to be in the public domain.

23 April 2020

Globalworth Real Estate Investments Limited

("Globalworth" or the "Company")

Update on Covid-19

Introduction

First and foremost, the safety and wellbeing of our people, partners, communities, and other stakeholders, continue to be our top priority as we focus on safeguarding our business, protecting our assets and minimising our exposure to the impact of Covid-19. Globalworth is following regulations and recommendations issued by the World Health Organisation as well as national, regional and local governments and adapting its operations accordingly.

The entire Globalworth team is committed to fight and overcome this crisis and the Board thanks them for their tireless work and efforts so far.

As outlined in our announcement on 26 March 2020, we are implementing numerous significant measures to protect ourselves and will continue to do so on the basis that this crisis may be unprecedented in terms of both severity and longevity.

Country update

Poland and Romania each have around 10,000 confirmed COVID-19 cases with Romania registering over 500 deaths and Poland over 400 deaths. In the last several weeks the governments in both countries, in line with many other countries, have declared a state of emergency enabling them to adopt very restrictive measures in terms of movement of people and travelling, as well as enforcing the closure of all but essential retail premises.

They have also imposed emergency measures to protect affected businesses. Such measures have included rent reductions and/or suspensions for non-essential retail businesses for as long as the state of emergency applies. In both countries, non-essential retail premises have been ordered to close whereas certain types of restaurants are only allowed to operate a take-away or delivery service. There has been no government measure in either country forcing the closure of office premises, logistics/light industrial assets or essential retail businesses (supermarkets, pharmacies, convenience stores etc.).

General Portfolio Update

Globalworth's high quality portfolio is primarily focused on office real estate assets in prime locations in Poland and Romania. As of December 31st, 2019, our portfolio generated over Euro 190m of contracted annual rental income, of which office rental income accounts for more than 85%, with retail accounting for around 9%, logistics/light industrial with 5%, and other rental income with 1%.

On the retail side, more than 50% of the related rental income is related to retail operations which have not been closed down or materially affected by the emergency legislation in both countries and we do not foresee any material rental income reductions from such tenants. On the remaining retail rental income (which includes non-closed but materially affected operations like restaurants/canteens etc.), we have received notifications from almost all affected tenants and we are working closely with them to find appropriate solutions once their operations resume. The majority of the affected retail rental income comes from our three mixed-use assets in Poland, Hala Koszyki, Renoma and Supersam.

On the office premises side, we have yet to see a significant impact, although we are in discussions with several tenants which has seen their operations affected as a result of the crisis and the related measures. The most affected tenants relate to the co-working industry, which relates to close to 3% of our annual rental income.

We are in constant communication with all our tenants and adopt an open and collaborative approach, which on one hand, targets to assist them to weather this crisis and on the other hand, protects the sustainability and longevity of our income. In certain cases, we have agreed near term rent concessions or incentives in exchange for extension of lease duration. We are adopting a careful case by case approach rather than applying horizontal or vertical decisions without considering each situation. The strength and depth of our in-house leasing, asset/property management and legal teams is once again proving to be a significant competitive advantage since we are able to react more quickly agreeing tailor made solutions with our clients.

Adopted Measures

We have been implementing many significant measures with the aim to preserve cash flow and protect our income and assets. We outline below some of the more meaningful ones:

Asset/Property Management

We have been terminating and/or suspending or renegotiating supplier contracts, achieving significant savings. As our lease agreements are triple net, and all these costs are part of the service charges paid by tenants, we are now in the process of discussing with our tenants the most efficient way to pass on these savings to them in the interim until we perform the final 2020 service charge reconciliation early next year, thereby assisting them during this very difficult period.

Building Capex

We have substantially reduced our standing asset capex programme to the absolute essential from a health and safety and maintenance standpoint. This has resulted in the suspension of over EUR 12m planned standing building capex works for this year. This has no effect on tenant fitout works which continue as normal, but at renegotiated prices with suppliers and/or contractors.

Developments

We are significantly scaling back our construction and development programme only to those projects which have significant pre-lets or construction is substantially completed or very advanced. In total we were expecting over the next 12 months to spend more than Euro 90m in development projects. This has, so far, been reduced by Euro 36m to Euro 54m, through renegotiations with contractors, value-add engineering, scope reduction and works postponement.

New Investments

New investment activity is currently suspended. We continue to monitor the investment market for investment opportunities, and we may decide at a later stage to pursue an investment with particularly attractive potential returns.

HR & Administration

The Company has been taking actions to reduce overhead and other costs, including employee-related ones. In this respect, the new Group annual remuneration policy was adjusted so that all bonuses for 2019 will now be paid in shares (rather than 50% cash and 50% shares). The mechanics of this are that for senior employees, bonuses will be paid 100% in shares in two parts (50% on March 31st, 2021 and 50% on March 31st, 2022) and for all others 100% will be paid on March 31st, 2021. These shares will be transferred upon vesting at an already fixed value of €7.00 per share and with no further vesting period or lock up. A further announcement on this will be made in due course.

We will continue to look at our entire cost base and are already achieving significant savings thanks to our longstanding relationships with a number of suppliers.

Financial Position

Globalworth benefits from a strong balance sheet to overcome this challenging period, with low leverage (net LTV of close to 35% as of December 31st, 2019), widely diversified sources of revenues and long-dated lease income stream most of which comes from a top-tier multinational customer base.

As of December 31st, 2019, the Company reported a liquidity position of over Euro 290 million, with ample room to comply with financial covenants and without any financial debt maturity until June 2022.

Since the beginning of the year, Globalworth has further improved its liquidity to over Euro 550 million of available cash currently, by drawing on various committed and new facilities, and through some of the aforementioned cost cutting measures. We will continue to safeguard our liquidity position in order to be able to navigate through this period of significant uncertainty.

Caring for our Community

The Globalworth Foundation is strongly involved in supporting the fight of the epidemic in both Romania and Poland. So far, our foundation has allocated Euro 550,000 to assist hospitals and related staff in both countries who are in the frontline of this unprecedented fight putting their own health at risk. We are all grateful and appreciative for their extraordinary effort and commitment to protect lives.

Outlook

We believe that given the nature of our portfolio and assets, our robust balance sheet and liquidity position, the early and drastic cost saving measures, and the strength and ongoing commitment of all our employees, our business is well positioned. However, given the ongoing uncertainty over the duration and severity of the crisis being caused by Covid-19 and the severe and potentially long-lasting government measures, it is too early to give any meaningful guidance in relation to the eventual impact on our business. We will continue to take all necessary measures to mitigate the impact as much as possible.

For further information visit www.globalworth.com or contact:

Enquiries

About Globalworth / Note to Editors:

Globalworth is a listed real estate company active in Central and Eastern Europe, quoted on the AIM-segment of the London Stock Exchange. It has become the pre-eminent office investor in the CEE real estate market through its market-leading positions both in Romania and in Poland. Globalworth acquires, develops and directly manages high-quality office and logistics/light-industrial real estate assets in prime locations, generating rental income from high quality tenants from around the globe. Managed by c.240 professionals across Cyprus, Guernsey, Romania and Poland, the combined value of its portfolio is €3.04 billion, as at 31 December 2019. Approximately 93.4% of the portfolio is in income-producing assets, predominately in the office sector, and leased to a diversified array of over 715 national and multinational corporates. In Poland Globalworth is present in Warsaw, Wroclaw, Lodz, Krakow, Gdansk and Katowice, while in Romania its assets span in Bucharest, Timisoara, Constanta and Pitesti. For more information, please visit www.globalworth.com and follow us on Facebook, Instagram and LinkedIn.

IMPORTANT NOTICE: This announcement has been prepared for the purposes of complying with the applicable laws and regulations of the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom. This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "targets", "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward looking statements include all matters that are not historical facts and involve predictions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, results of operations, financial position, liquidity, prospects, growth or strategies and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. Save as required by law or regulation, the Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement.